Siemens 2012 Annual Report Download - page 143

135 D. Consolidated Financial Statements
239 E. Additional Information
130 C. Siemens AG (Discussion on basis of
German Commercial Code)
134 C. Notes and forward-looking statements
129 C. Compensation Report, Corporate Governance
statement pursuant to Section a of the
German Commercial Code, Takeover-relevant
information and explanatory report

The Power Transmission Division covers high-voltage trans-
mission solutions, power and distribution transformers, high-
voltage switching and non-switching products and systems,
and innovative alternating and direct current transmission
systems. The Division supplies energy utilities and large indus-
trial power users with equipment, systems and services used
to process and transmit electrical power from the source, typi-
cally a power plant, to various points along the power trans-
mission network. The Division is working with joint ventures
in China with different partners and has a joint venture with
Infineon Technologies in Germany for design, manufacturing
and sale of high performance semiconductors.
The Energy Sector distributes its products and services through
its own dedicated sales force, supported by Siemens’ world-
wide network of regional companies. Additional sales chan-
nels include joint ventures and license partners, especially in
markets requiring a high degree of local knowledge.
Overall, the Sector’s principal customers are large power utili-
ties and independent power producers. Because certain signifi-
cant areas of the Sector’s business, such as power plant con-
struction, involve working on medium- or longer-term projects
for customers who may not require the Sector’s services again
in the short term, the Sector’s most significant customers tend
to vary significantly from year to year.
The Energy Sector’s business activities vary widely in size from
component delivery and comparatively small projects to turn-
key contracts for the construction of new power plants with
contract values of more than €. billion each. The large size of
some of the Sector’s projects occasionally exposes it to risks re-
lated to technical performance, a customer or a country. The
Sector has experienced, and may continue to experience signifi-
cant losses on individual projects in connection with such risks.
Moreover, the Sector generates an increasing portion of its rev-
enue from oil and gas activities and industrial customers in the
developing world. While this region represents a growth market
for power generation, and transmission products and systems,
the Sector’s activities in that region expose it to risks associated
with economic, financial and political disruptions that could
result in lower demand or affect customers’ abilities to pay.
While the Sector historically competed primarily with large in-
dustrial companies from western countries, emerging market
competitors have become more and more important, as they are
increasingly expanding their operations beyond the borders of
their home markets. The Sector’s competitors vary by Division.
The Fossil Power Generation Division’s market consists of a rel-
atively small number of companies, some with very strong
positions in their domestic markets. Its principal competitors
in gas turbines are Alstom, General Electric and Mitsubishi
Heavy Industries, whereas its main competitors in steam tur-
bines are Alstom, Bharat Heavy Electricals Limited, General
Electric and Toshiba. In China, manufacturers are mainly
focused on their large home market, but have recently begun
to transform from local to international suppliers. The Division
aims to participate in growth through a Chinese joint venture.
Korean engineering and procurement companies offer a large
product and solutions range and establish themselves as one-
stop-shops which offer customer solutions out of one hand.
In instrumentation and controls, ABB and Emerson Electric are
the Division’s principal competitors.
The principal competitors in the market served by the Wind
Power Division are Enercon, Gamesa, General Electric, Gold-
wind, Sinovel, Suzlon and Vestas. The competitive situation
differs between the market segments. In the market for on-
shore wind-farms, competition is widely dispersed, without
any one company holding a dominant share of the market. In
contrast, there are only a few major players in the market for
technologically more complex offshore wind-farms. Overall,
the industry currently suffers from overcapacity and is largely
regarded as being in an early stage of consolidation.
The principal competitors of the Oil & Gas Division vary by prod-
uct; in automation and electrical equipment, they are ABB and
Honeywell above all, whereas in compressors and steam and gas
turbines, they are Dresser Rand, General Electric, MAN Diesel &
Turbo and Solar Turbines. Overall, competition in the markets
served by the Oil & Gas Division is characterized by a relatively
small number of companies, some with a very strong position in
the markets and some with a regional focus, playing key roles.
The primary competitors of the Power Transmission Division
are a small group of large, multinational companies offering a
wide variety of products, systems and services. Its key global
competitors are ABB and Alstom. Further competition comes
from emerging countries, regional and niche manufacturers,
such as XD from China, Crompton Greaves from India, HHI from
Korea and Mitsubishi Electric from Japan. Power Transmission
Division entered into several joint ventures in China, which is
the Sector’s largest national power transmission market.
Healthcare
The Healthcare Sector offers customers a comprehensive
portfolio of medical solutions across the treatment chain –
ranging from medical imaging to in-vitro diagnostics to inter-
ventional systems and clinical information technology sys-
tems – all from a single source. In addition, the Sector provides
technical maintenance, professional and consulting services,
and, together with Financial Services (SFS), financing to assist
customers in purchasing the Sector’s products.